Xiaomi’s Transformation from an Internet Company to a Leading Technology Company Driving Innovation
Xiaomi experienced a lengthy and challenging autumn in 2016.
Following the underperformance of mobile phone sales in 2015, Xiaomi witnessed its first and only negative growth in 2016.
The release of the Xiaomi 5 in February 2015 was seen as a turnaround for the company, but the shortage persisted for over two months. Lei Jun, after taking control of the supply chain, discovered that even Apple found their screws more expensive. Furthermore, certain departments within Xiaomi displayed excessive arrogance.
By the third quarter, Xiaomi’s market share was on par with other niche mobile phone brands and those with lower sales.
These circumstances formed the backdrop for the Xiaomi press conference held at Peking University Stadium in October 2016. The conference itself marked a challenging transformation period for Xiaomi. However, the first 50 minutes of the press conference proceeded in an orderly and uneventful manner, with the exception of the phrase, “One side is a master, the other side is having fun.”
Just as the audience and even some Xiaomi employees believed the conference was coming to a close, Lei Jun appeared on stage and announced the release of another mobile phone that day—the Xiaomi MIX, a full-screen device.
The MIX project was an innovation conceived by Lei Jun back in 2014, a year when Xiaomi experienced significant growth, with a valuation of $45 billion and over 60 million mobile phones shipped. MIX represented both the embodiment of Xiaomi’s ambition at the time and a daring endeavor. Lei Jun emphasized that commercial costs should not hinder the pursuit of innovation, urging for the push toward extreme innovation.
Thus, when the mobile phone with a 90% screen-to-body ratio was unveiled, cheers and applause erupted at the press conference.
The introduction of the MIX can be seen as a resurgence for a struggling Xiaomi. Even those with biases against the company had to admit that Xiaomi gained respect within the industry through this technological masterpiece, setting the trend for industry-wide technological innovation.
Lei Jun drew inspiration from his business idol, Andrew Grove, co-founder of Intel, who recounted Intel’s difficult years in the ’80s in his book “Only the Paranoid Survive.” Grove narrated how Intel transformed from a declining memory business into a microprocessor company, despite plans to shut it down being thwarted by the Japanese. Grove proposed changing Intel’s slogan to “Intel, the Microprocessor Company.” Grove explained his rationale:
This concept of “Vision” holds great meaning for me. It is far-reaching and profound. All you need to do is capture the essence of your company and focus on your business objectives.
For Xiaomi, the significance of the MIX went beyond market share and shipments. At the end of that challenging autumn, Xiaomi used concrete products, rather than slogans, to answer a crucial question: What kind of company is Xiaomi?
From MIX to MIX Fold 3
In his annual speech on August 14 of this year, Lei Jun reminisced about his prosperous years in Zhongguancun: “Jinshan is where I truly grew up.” While Lei Jun is widely recognized as the founder of Xiaomi, his experience in Jinshan often goes unnoticed. Lei Jun has repeatedly mentioned that the “Fire of Silicon Valley,” where Steve Jobs founded Apple, was the source of his dream—to create an exceptional company.
Before Xiaomi, Kingsoft served as the vehicle for this dream. However, when Kingsoft went public with a market value of HK$600 million, Lei Jun felt remorseful for his colleagues who had accompanied him on this journey.
In 2007, Lei Jun left Kingsoft and bought an iPhone as a technology enthusiast. The “assembled in China” label prompted him to ponder the gap between China’s manufacturing industry and that of Western countries.
By 2010, at the age of 40, Lei Jun established Xiaomi. This venture was accompanied by the well-known “Thunder Five,” the first of which was to follow industry trends.
Yet, Xiaomi faced a downturn. Lei Jun reflected on the company’s first five years and recognized that its fragile organizational structure allowed it to emerge as a leader globally. However, it was only when Lei Jun personally took charge of the mobile phone department in 2016 that he realized the company had vastly underestimated the challenges in the hardware industry.
This forms the backdrop for the Xiaomi MIX project. In Lei Jun’s book, “Xiaomi Entrepreneurship Thoughts,” he sums it up: This journey not only demonstrated Xiaomi’s prowess in pursuit of technological advancements but also marked the rebuilding of reverence within the supply chain.
Why does the supply chain command respect? Despite increasing the screen-to-body ratio from 70% to over 90% with the Xiaomi MIX, Xiaomi miscalculated the engineering complexity.
As the screen size increased, the panel proportions also changed. Xiaomi’s ID engineers spent a year experimenting with various solutions before settling on the 17:9 aspect ratio. However, Android’s compatibility requirements dictated a screen ratio between 4:3 and 16:9. Consequently, Xiaomi invested an additional six months in persuading Google to modify these guidelines.
Simultaneously, Xiaomi MIX utilized a unique ceramic material that required firing at a high temperature of 1,500°C. Even a slight temperature control error during trial production rendered 5,000 ceramic pieces unusable. Throughout the entire research and development process, Xiaomi needed close collaboration with upstream suppliers, convincing them that such advanced products could generate lucrative orders.
However, until two months before the product’s release, substantial opposition persisted within Xiaomi. Most skeptics doubted that Xiaomi could develop a super-sized mobile phone. After the press conference, Lei Jun returned to the office with his R&D engineers and declared, “Our ancestors must be looking down on us in pride, as we have finally achieved it.”
Xiaomi MIX marked the first instance of Xiaomi collaborating with suppliers as a terminal brand, fostering new production processes and technical solutions collectively. This integration and participation in the supply chain constitute the core competence of consumer electronics companies.
In 2012, Apple introduced a manufacturing process called CNC integration with the iPhone 5. This process divided the phone into two parts: the screen and the casing. Previously, a sandwich design was used, consisting of the front and rear parts, with four primary components: panel, stainless steel frame, stainless steel sheet, and glass back cover.
The introduction of this advanced manufacturing process propelled the entire smartphone industry into the era of all-metal casings. Although Apple lacked its own production lines, it engaged in every aspect of product manufacturing. When introducing new components or production processes, Apple often collaboratively developed and tested them with hundreds of suppliers.
Lei Jun later commented in his book:
The public often holds a stereotypical view on technology construction and application, associating it with in-house production of key components. However, whether it is a “vertical integration” model like Samsung, where nearly all components are produced internally, or a highly integrated global supply chain like Apple, understanding and controlling technology to deliver orders does not depend on such factors. It provides an astonishing experience.
In 2020, Xiaomi unveiled another concept product yet to be mass-produced—the surround-screen mobile phone MIX Alpha. This device incorporated three groundbreaking technologies: screen fixation and layered lamination, 5G highly integrated LCP antenna solution, and surround-screen software solutions, establishing an industry precedent. Xiaomi’s independently developed screen bonding technology constituted the crucial element.
In the folding screen mobile phone MIX Fold 3 released on August 14, 2023, Xiaomi did not use the already popular water drop hinge, but used a self-developed “keel hinge” to make the unfolded mobile phone nearly thinner than mainstream products. 10%.
In order to achieve the miniaturization of Leica optical professional imaging systems, Xiaomi has also achieved many breakthroughs in key areas such as miniaturized OIS motors and ultra-thin high-lens lenses.
When Xiaomi was making mobile phones in 2011, Lei Jun wanted to spend 2,000 yuan to make a dual-core phone with the highest performance, but no one thought it could be done. This made Lei Jun believe that if Xiaomi mobile phone can be priced at 2,000 yuan, it will definitely become a hit.
At that time, Xiaomi’s idea was to use the world’s first-class components and production processes to make mobile phones. But now, Xiaomi has begun to create its own first-class components and production processes, and drive progress upstream and downstream of the industrial chain.
However, most people underestimate the difficulty and complexity involved.
The B side of technology
In 2014, Xiaomi separated a small team from its mobile phone hardware R&D team to form Songguo Company. The team is targeting the top of the mobile phone chip field – mobile phone SoC (system-on-chip) with CPU as the core.
After more than three years of research and development, Pinecone’s first chip, the Paper S1, came out in 2017 and was installed on the special model Xiaomi 5C. However, Xiaomi’s chip business began to hit a stalemate. The second-generation product S2 was not released for a long time. Pinecone was eventually reorganized and spun off into a new independent company, and its business shifted to IoT (Internet of Things) chips.
In fact, Xiaomi’s self-developed chip business and Xiaomi MIX both started in 2014, when the company was at its peak, and experienced a long trough in the following two years. But unlike MIX, which was a blockbuster, Xiaomi’s ThePaper S1 went to the completely opposite ending.
In 2016, Lei Jun had one-on-one conversations with 200 team members, and the full-year task he set for Xiaomi was to “make up lessons.”
One of the results of the supplementary course was that Lei Jun began to systematically review Xiaomi’s R&D strategy and corresponding system, and summarized three key factors in technology R&D: the objective laws of technology development and R&D accumulation; and coordinating resources with the company’s current strategic advancement. The matching degree of reasonable allocation; the long-term evolution of the overall technical system construction requirements.
Later, when recalling this experience, Lei Jun used a highly generalized expression: Aim high and don’t aim too high; keep your feet on the ground and don’t forget to look up at the stars.
These thoughts were ultimately reflected in the three levels of Xiaomi’s R&D work set by the Xiaomi Technical Committee after its establishment: R&D for
current products: aiming for on-time and high-quality delivery;
pre-research for products in 1 to 3 years: focusing on advanced The goal is to create differentiated competitiveness of the next generation of products;
pre-research for products in 3 to 5 years and beyond: aiming for extremely innovative and even disruptive self-research to establish future competitive advantages for the group.
After ThePaper S1 came to a halt, Xiaomi did not stop research and development of chips, but adopted a more practical approach: starting from ISP imaging chips, charging chips and other related product experience areas, and advancing in step with the product needs of Xiaomi’s mobile phone business.
The design of traditional mobile phone SoC needs to simultaneously undertake computing, signal processing, image processing, audio and video encoding and decoding, task distribution and other tasks. But for chip design companies such as Qualcomm and MediaTek, which have many downstream customers, they often give priority to ensuring the “versatility” of the chip, that is, focusing on the core computing performance of the chip.
This kind of preference for one thing over another in general chip design ideas is exactly the space for Xiaomi to innovate. In 2021, Xiaomi released its self-developed Pascal C1 chip. Its image processing capabilities combined with self-developed image processing algorithms allow mobile phones to provide faster and more accurate focusing performance in dark scenes.
The fast charging experience brought by ThePaper P series charging chips has become a core function of Xiaomi mobile phones.
Lei Jun summarized this process as: Xiaomi has moved from integrated technological innovation to independent technological innovation. In Xiaomi’s core mobile phone business, from self-research on chips, to software capabilities represented by MIUI, to innovation in new materials, new processes and manufacturing equipment, Xiaomi has accumulated a series of self-research results in core technologies.
For Xiaomi, this is not a thrilling core-making story, but it is a path that is more in line with the laws of industrial development. People often think that great innovations happen suddenly, but this is not the case.
In the face of long-term technology research and development, not all companies can maintain sufficient strategic focus. As Lei Jun later recalled the development process of Xiaomi MIX in “Xiaomi Entrepreneurship Thoughts”: The (MIX) project was established at the peak of Xiaomi’s early success. Even if it encountered a life-and-death dilemma and faced huge uncertainty about whether the project could be mass-produced, the Xiaomi R&D team Still committed to investing, without any wavering.
This is a microcosm of the growth of a technology company.
The person who makes the “problem”
In March 2016, Lei Jun, who was attending a meeting in Beijing, saw the results of the game between AlphaGo (Alpha Go) and Lee Sedol (a famous Korean Go player). He predicted that AlphaGo could barely win one game, but the result was that AlphaGo only lost one game.
The impact of this incident on Xiaomi was reflected in the executive meeting in October that year. Lei Jun demanded that Xiaomi must fully invest in artificial intelligence. At the same time, smart speakers have become a strategic product line—before this, Xiaomi believed that the router should be the hub of the smart home because it connects all devices.
In July 2017, Xiaomi officially released the “Xiao Ai Classmate” smart speaker, priced at 299 yuan, which was a great success. But the biggest significance of smart speakers is not shipments, but that Xiaomi’s management team clearly sees the huge wave of AI and the necessity for Xiaomi to participate in this wave. Subsequently, Xiaomi’s investment in artificial intelligence increased rapidly.
At that time, public opinion discussions about Xiaomi were still based on the “hot-selling model” and “Internet model”, so that Xiaomi’s technological accumulation has been ignored for a long time.
As Xiaomi emerged from the crisis, management began to systematically sort out Xiaomi’s technology layout. Lei Jun believed that after Xiaomi’s integrated and independent technological innovation, it should continue to invest in underlying core disruptive technological innovation.
It can be said that AlphaGo is a catalyst, and Xiaomi has joined this battle for talents and technology. Taking this as a starting point, Xiaomi began a series of explorations into future smart terminals and underlying technologies:
In August 2021, Xiaomi released the engineering exploration version of the bionic quadruped robot CyberDog, which brings together Xiaomi’s core technology accumulation in the field of artificial intelligence since its establishment. Not long ago, Xiaomi announced its iteration CyberDog 2, which is equipped with Xiaomi’s self-developed high-explosion small-size motor.
In 2021, after in-depth exchanges with more than 200 automotive industry veterans, 4 internal management discussions, and 2 formal board meetings, Xiaomi decided to enter the smart electric vehicle market.
In August this year, Xiaomi announced that the latest version of the Xiaomi AI large model, MiLM-1.3B, has been successfully run locally on mobile phones, and some scenarios are comparable to the running results of the 6 billion parameter model in the cloud. This achievement can be traced back to the Xiaomi AI Lab established in 2016 and the AI large model team established in April this year.
The technological exploration represented by robots, cars and AI finally ended with the strategic upgrade of Xiaomi technology proposed by Lei Jun in his annual speech: deep cultivation of underlying technology, long-term continuous investment, deep integration of software and hardware, and comprehensive AI empowerment, that is, (software × hardware )AI.
The significance of the advent of the iPhone in 2007 is that Apple proved to the industry that a mobile terminal using the Internet as a carrier can be produced. In other words, Apple has proven that there is an answer to this question, and latecomers only need to calculate the corresponding answer based on their own solution. A large number of mobile phone brands are the beneficiaries of Apple.
The upgrade of Xiaomi’s technology strategy means that Xiaomi will start to be the one who asks questions and try to answer these questions that may not have answers.
In 2016, the full screen of Xiaomi MIX can be regarded as a major breakthrough for Xiaomi in components and production technology. After 2017, Xiaomi’s exploration in three general directions was the result of sorting out its own R&D strategy.
The difference between the two is that the former is a focused single-point breakthrough, while the latter is the construction of a strategic R&D system.
Point-like breakthroughs can be a success, but the establishment of a research and development system does not happen overnight.
Although mobile phones are still Xiaomi’s core business, the technology landscape behind them is obviously broader. Software capabilities represented by AI have become the underlying technology of Xiaomi, and are used to connect a series of terminal products including mobile phones, automobiles, AIoT (Artificial Intelligence Internet of Things), etc. With the start of mass production of Xiaomi cars in 2024, Xiaomi will complete the closed loop of the technological ecology of “people and cars”.
In this context, a complete R&D chain extending from terminal products to underlying technology is a system formed by Xiaomi’s technology accumulation in the past ten years, and it is also a barrier for a technology company.
From engineering solutions as small as a power management chip and folding screens to large-scale explorations such as new energy vehicles and robots for the next ten years, Xiaomi is entering the no-man’s land of cutting-edge technology as a technology company. In this process, Xiaomi may make more mistakes than in the previous ten years, but this is exactly a symbol of the maturity of a high-tech company.
As long as the distance is infinite, there will always be ships setting off against the rapids.
a ball of fire
Before Xiaomi went public, it released an official documentary called “A Ball of Fire”. The name comes from Lei Jun’s inner activities after reading “Silicon Valley Fire”: I was ignited by the dream of computers to change the world, and a ball of fire was ignited in my chest. I couldn’t help it for a long time. calm.
The story of Lei Jun’s founding of Xiaomi is often talked about, but the experience that had the greatest impact on his life was actually his experience at Jinshan. Jinshan is the place where Lei Jun’s dream of a “great company” was first entrusted to him, and it is also the place where “a fire” burns blazingly.
In 1995, the Pangu component, which Lei Jun led a team to develop for three years, came out. Kingsoft spent not only tens of millions of yuan in R&D investment, but also the idealism of the domestic IT industry that was booming in the early 1990s. But as a result, only 2,000 units were sold in half a year, and Jinshan was once at the end of its rope.
At Kingsoft, Lei Jun’s dream was “I want to spend the next ten years making a big bet with Microsoft.” His confusion was “I would have accepted it if I didn’t work hard, but I worked very hard.” Until he said goodbye to Kingsoft for 16 years, he was sad to leave. Huan, Lei Jun finally figured out, “The next ten years will be the ten years of the mobile Internet.”
These thoughts were later condensed into “following the trend.” For a long time, the understanding of Xiaomi’s follow-up trend has been tied to Lei Jun’s “trend theory”. Lei Jun’s image is like the godfather of Internet entrepreneurship, rather than the Pascal homework that the teacher included in the new version of the textbook, and he likes to ask others if they can write code. A programmer who has no sense of writing poetry.
Various factors are intertwined, as if the wave of mobile Internet created Xiaomi, but this is not the whole picture.
Before 2016, Xiaomi was indeed a phenomenon created by the mobile Internet. It continued to make single-point breakthroughs through popular products, used Internet thinking to occupy the high ground of market segments, and allowed countless people to use smart phones for the first time at reasonable prices. cell phone.
When Xiaomi made the power bank, it introduced the 18650 battery cell and aluminum alloy integrated shell technology from the notebook industry. The ID team opened nearly 200 sets of molds and the final price was 69 yuan. Later, during the listing road show in the United States, Zhou Shouzi, then CFO, took out Xiaomi Rainbow Batteries and told investors that Xiaomi batteries cost 9.9 yuan. The venue burst into applause.
However, after the crisis and trough in 2016, Xiaomi realized its weak control over offline channels, lack of deep participation in the supply chain, and lack of understanding of the R&D system. The “trend” that Xiaomi needs to face is the domestic mobile phone market that is about to become saturated.
This is why after the “make-up lessons” in 2016 and the success of Xiaomi MIX, Xiaomi began to examine its own shortcomings on a large scale, systematically sorted out its R&D layout, and gradually established its own technology strategy and corresponding R&D system.
Xiaomi’s announcement to enter the automobile market in 2021 is another key node. To a certain extent, it reflects Xiaomi’s transformation from a mobile phone brand to a technology company with the “people and cars” ecosystem as its core.
In this process, Lei Jun indeed led Xiaomi to follow the trend compared to his high ambition and no hesitation at Jinshan. But this “potential” is not limited to the mobile Internet, but rather the understanding of the laws of industrial development, the awareness of supply chain integration capabilities, and the respect for manufacturing.
The most objective evaluation of Xiaomi’s significance to China’s manufacturing industry is likely to come from an American media. In 2016, the British version of “Wired” wrote an article about Lei Jun. There was a sentence in it that said: Over the years, Xiaomi has changed the world’s view of Chinese products.
It may be a bit exaggerated to say that Xiaomi is a model for Chinese high-tech companies, but it is an indisputable fact that Xiaomi has truly changed the face of manufacturing in China.
In his annual speech on August 14, Lei Jun once again talked about the dream of “creating a great company” and said: I really take this dream seriously, find ways to break it down into achievable goals one after another, and then do my best. To achieve.
Compared with the high-spirited and aggressive company back then in Jinshan, Xiaomi has been steady and down-to-earth for more than ten years.
What can represent Xiaomi is not “beating”, “flash sale” and “having the ability to sell goods”. On the contrary, the top ten 5G patent families in the world have in-depth technical coverage in 12 technical directions and 99 subdivisions. The ability to follow the trend and the courage to go against the trend are the integral parts of Xiaomi.
The greatness of a technology company is not reflected in its leading market share, huge user base and rising company revenue, but in its keen sense of cutting-edge technology, its attraction to outstanding talents, and its perseverance in technological no-man’s land. exploration, and consumer recognition and respect.
If such a company is going to appear in China, why can’t it be Xiaomi?
